The final quarter of the year emerged as a game changer, with Q4 2025 alone accounting for USD 4.2 billion, the highest-ever quarterly inflow recorded in the Indian real estate sector.

Domestic Capital Takes the Lead

Domestic institutional investors emerged as the primary growth engine in 2025, with investments more than doubling year-on-year to USD 4.8 billion, accounting for 57% of total inflows.

Foreign investments, while moderating by 16% YoY to USD 3.7 billion, showed clear signs of revival in the last quarter, indicating gradual recovery in global investor sentiment amid improving trade conditions and easing geopolitical uncertainty.

“Private equity investments in Indian real estate reached a new high in 2025, supported by record capital deployment in the last quarter of the year. Office assets continued to dominate, followed by residential and industrial & logistics assets,”
— Badal Yagnik, CEO & Managing Director, Colliers India

Office Assets Dominate Institutional Investments

The office segment remained the top investment destination, attracting USD 4.5 billion in 2025—nearly double the inflows seen in 2024. Office assets alone accounted for 54% of total institutional investments during the year.

Key highlights:

• Q4 2025 contributed nearly two-thirds of annual office investments
• Strong Grade A leasing activity supported investor confidence
• Increased participation from both domestic and foreign capital

The residential segment followed with USD 1.6 billion in inflows, marking a 36% YoY growth and an 18% share in total investments. Long-term demand fundamentals, favourable demographics, and joint-venture led expansion into Tier II cities continued to attract capital.

Asset-wise Institutional Investment Trends (USD million)

*Alternate assets include data centres, life sciences, senior housing, student housing, holiday homes, and schools.
Source: Colliers

Q4 2025: A Record-Breaking Quarter

Quarterly inflows peaked in Q4 2025 at USD 4.2 billion, reflecting a 123% YoY jump and a 231% QoQ rise.

Q4 2025 Asset-wise Snapshot (USD million)

REIT Momentum Strengthens Office Investment Case

The year also witnessed:

• Listing of the fourth office-focused REIT
• Portfolio expansion by existing REITs
• Higher occupancy levels and rental growth

“With over 370 million sq ft of office stock having REIT potential, we expect greater institutionalisation and consolidation in the coming years,”
— Vimal Nadar, National Director & Head of Research, Colliers India

Bengaluru and Mumbai Lead Capital Inflows

Bengaluru and Mumbai together accounted for nearly half of total investments in 2025, largely driven by large office transactions.

City-wise Investment Inflows (USD million)

Source: Colliers

Multi-city investments accounted for USD 2.3 billion, with over 40% directed towards residential projects, highlighting growing investor appetite for early-stage housing developments and emerging markets.

Outlook for 2026

Colliers expects institutional investments to remain robust in 2026, supported by:

• Growing domestic capital pools
• Improving global risk appetite
• Strong economic fundamentals

Priority segments:
Offices
Industrial & logistics parks
Residential housing

Also Read: From Crisis to Opportunity: Stressed Real Estate Projects Emerge as India’s Next Investment Frontier

The post Year-End Investment Surge Pushes Institutional Inflows in Indian Realty to Record USD 8.5 Billion in 2025 appeared first on Square Feat India.

Meanwhile, new office space supply witnessed a sharp decline of 32% year-over-year (YOY), with only 17.4 million square feet completed in H1 2024. This limited supply, coupled with increased transaction activity, led to a decrease in the overall vacancy rate. By the end of June, the vacancy rate had dropped to 15.9%, down from 18.0% in the previous year.

“India’s office market saw record-high absorption in the first half of 2024, indicating positive business sentiment among occupiers. The return of employees to physical offices has spurred office demand across all occupier segments, including tech. The demand momentum is expected to continue through the second half, with the year anticipated to see new record absorption levels of 65-66 million square feet in 2024. We expect strong leasing activity from the tech, BFSI, flexible workspace, and manufacturing sectors,” said Naveen Nandwani, MD, Commercial Advisory and Transactions, Savills India

Source: Savills India Research

Looking ahead, Savills India anticipates record-breaking absorption levels for the full year, reaching approximately 65-66 million square feet. This would be the highest annual total ever recorded. However, new supply is expected to lag behind demand, potentially leading to an intensified competition for high-quality office spaces.

Key Highlights of H1 2024 for India office market

• Leasing activity in Q2 2024 reached 17.2 million square feet, reflecting a slight decrease of 2.0% compared to the previous quarter. However, new office space supply surged by 64% quarter-on-quarter to 10.8 million square feet.
• Bengaluru maintained its position as the top contributor to national leasing activity in the first half of 2024, accounting for 28% of the market. Mumbai and Hyderabad followed closely behind with shares of 18% and 16%, respectively
• Mumbai’s office market has shown a remarkable revival since the second half of 2023, with significant growth. The technology sector led the leasing activity, taking up 39.3% of the total space absorbed. The banking, financial services, and insurance (BFSI) sector followed at 16.9%, and flexible workspaces captured 13.9%.
• Mumbai stands out as the only city to witness a YoY increase in new office space supply during the first half of 2024. All other cities saw a decrease in new supply compared to the same period last year
• Year-over-year (YoY), leasing by the tech sector grew significantly by 61%, and the BFSI sector saw a 51% increase. However, the flexible workspace segment experienced a 16% decline in space take-up.
• Large deals (over 100,000 square feet) remained dominant in overall leasing activity this quarter, contributing 43.5% of all transactions.

Source: Savills India Research

City-Wise Key Trends

• Mumbai: Gained market share to become the second-largest market in terms of total leased space (gross absorption). The financial services sector (BFSI) remained the dominant driver of demand (35%), followed by technology (tech) at 17%. Notably, smaller deals (<25,000 sq. ft.) accounted for the largest share (39%), followed by mid-sized deals (25,000-99,999 sq. ft.) at 36%.
• Hyderabad: Maintained its position among the top 3 cities for office leasing. Large deals constituted a significant portion (62%) of the total absorption. The tech and healthcare & pharmaceutical sectors were the leading demand drivers (31% and 25% respectively), followed by flexible workspace providers and tech companies (18%).
• Pune: Witnessed a remarkable 37% year-on-year (YoY) increase in gross absorption, securing the fourth position. This growth was primarily driven by increased space take-up by BFSI, IT-BPM, and engineering & manufacturing sectors.
• Chennai: Experienced a slight decline (3% YoY) in leasing activity, with a total absorption of 4.4 million sq. ft. Tech companies were the primary driver (50%), followed by BFSI (15%).
• Delhi-NCR: The tech sector, previously the main contributor to leasing activity, has been overtaken by the flexible workspace segment, which now holds a 32% share of gross absorption. Mid-sized deals (25,000-99,999 sq. ft.) dominated the leasing activity in the first half of 2024 (H1 2024).

Also Read: 58% of companies to expand flexible office space portfolio by 2026

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·       Q2 2024 saw 15.8 million square feet of leasing across the top 6 cities

·       Developer confidence remains strong with 13.2 million square feet of completions in Q2 2024

·       With 52% cumulative share in Q2 2024, Bengaluru and Mumbai drive India office demand

·       Technology and Engineering & manufacturing sectors account 45% of quarterly demand, highest flex space activity in any quarter

Office market continued its strong performance in Q2 2024, registering 15.8 million square feet of office leasing across the top 6 cities, marking a notable 16% rise over previous quarter. 4 out of 6 cities saw more than 20% increase in office leasing in the second quarter on a sequential basis, signaling robust occupier confidence and market sentiment. Bengaluru and Mumbai led the office demand in Q2 2024, cumulatively accounting for more than half of India’s leasing activity. Office space demand in these two cities were driven by occupiers from diverse sectors such as BFSI, Technology and Engineering & Manufacturing.

After a prolonged phase of steady demand, Mumbai has seen a significant 3.5 million square feet of leasing during this quarter, twice the levels as compared to Q2 2023. This is mainly attributable to strong demand from newly completed office supply during the quarter.

“Driven by consistent demand across consecutive quarters, 2024 has already seen impressive leasing activity to the tune of 29.4 million square feet of office space, marking a 19% increase compared to the same period last year. The demand for quality office spaces continues to surge, reflecting the confidence of occupiers and investors alike. Anticipated easing of global financial headwinds and continued resilience in domestic economy augurs well for sustained growth in India’s office market. A strong H1 performance has set the tone for office space demand to comfortably surpass 50 million square feet for the third consecutive time in 2024.” says Arpit Mehrotra, Managing Director, Office services, India, Colliers.

Trends in Grade A gross absorption (in million sq feet)

Source: Colliers

Gross absorption: does not include lease renewals, pre-commitments and deals where only a letter of Intent has been signed.

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

Nearly 23.0 million square feet of Grade A supply added in H1 2024

During Q2 2024, new supply across the top 6 cities surged 6% YoY, at 13.2 million square feet. Mumbai accounted for 30% share in new supply, followed by Hyderabad at 27% share. Interestingly, on account of few prominent projects receiving completion certificates in Mumbai, new supply in Q2 2024 stood at 4.0 million square feet, the highest incremental quarterly supply in the past 3-4 years. Overall, with significant project completions and substantial materialization of pre-commitments, the first six months of 2024 have been particularly strong for the Mumbai office market.

Trends in Grade A new supply (in million sq feet)

Source: Colliers

Top 6 cities include Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune

With highest ever quarterly leasing, flex space momentum to continue in 2024

Technology and Engineering & Manufacturing remained the front runners during Q2 2024, accounting for almost half of the total demand during the quarter. Flex spaces also saw healthy leasing of 2.6 million square feet across the top 6 cities, highest in any quarter. Bengaluru and Delhi-NCR accounted for 65% of the flex space leasing activity, indicating rising demand for such spaces in these markets.

“Overall office leasing continues to remain broad based in the first half of 2024. Although, with 25% share, Technology sector drove office demand during H1 2024, leasing activity by occupiers from BFSI and Engineering & Manufacturing sectors witnessed healthy traction. Flex space activity across the major cities continues to grow from strength to strength. Flex operators have already leased about 4.4 million square feet of office space in H1 2024, underscoring the occupiers’ continued preference for flex spaces. This also reflects the evolving needs for agility and adaptability in the modern business environment”, says Vimal Nadar, Senior Director and Head of Research, Colliers India.

Overall, with demand outpacing supply, vacancy levels remained under check across the major markets, hovering around 17% by the end of Q2 2024. While rentals have increased as compared to the previous year, they have largely remained stable on a sequential basis.

Key deals Q2 2024 Pan India –

Also Read: Leasing by Global Capability Centres in India surged ~17 % year-on-year

The post Robust leasing of 29.4 million square feet in H1 2024 resonates strong developer & investor confidence in India office market  appeared first on Square Feat India.

Banking and finance sectors are the most likely to demand on-site renewable power sources for green spaces, according to JLL, followed by the construction, manufacturing, and consultancy industries One in three (33%) occupiers believe that on-site renewable energy will become non-negotiable for their organizations by 2030. Furthermore, 87% expect more than half of their energy needs to be met by renewables. Respondents also recognize that there exists a significant demand-supply gap for sustainable buildings, with demand projected to surpass supply.

“Investors and occupiers are increasingly recognizing the importance of prioritizing green energy sources in their office portfolios, emphasizing the need for a well-crafted and thoughtful renewable energy strategy. The real estate sector has a tremendous opportunity to become a key player in the electricity infrastructure and shape the future of renewable energy, thereby advancing our aspirations for a greener and more sustainable future. In India, a majority of corporations are actively seeking to power most of their portfolio with renewables in the coming years, a significant move towards achieving Net Zero Carbon goals. The Asia Pacific (APAC) region, particularly countries like Australia, China, Vietnam, and India, is at the forefront of this transition towards sustainable energy. In fact, these countries have collectively contributed to around 60% of the global increase in renewable energy capacity in recent years. This remarkable statistic underscores their unwavering commitment to sustainable development and their embrace of renewable energy solutions,” said Radha Dhir, CEO and Country Head, India, JLL.

Transitioning to renewable energy is a critical step for the real estate industry to redefine buildings as active contributors through on-site renewable energy generation.

“This trend extends beyond India, with real estate asset owners and occupiers across the Asia Pacific region increasingly demanding renewable energy and on-site renewable power sources. By strategically choosing renewable energy sources and investing in buildings that are ready to actively engage with renewables-powered grids, there is significant scope to reduce long-term energy costs, while achieving sustainability goals within real estate portfolios,” said Kamya Miglani, Head of ESG Research, Asia Pacific, JLL.

For investors and occupiers seeking to increase the use of green energy in office portfolios, a range of well-planned strategies and considerations are necessary. The JLL survey reveals that a combination of on-site generation, such as solar PV installations, and/or off-site renewable energy procurement through Renewable Energy Certificates (REC) and Power Purchase Agreements (PPA), could be the solution according to corporate real estate leaders. It is recommended to assess sites for their feasibility for solar PV installation and local grid connections, as well as the potential for energy sharing with other buildings within the portfolio. Engaging with a real estate advisor can facilitate the evaluation of feasible options, whether it be simple roof leasing with tenant system investment, third-party financed solar PPAs, or landlord capital investment, all in line with broader net-zero carbon goals.

Embracing renewable energy is not only crucial but also viewed as a vital step for the real estate industry’s transformation into active contributors to sustainability. Currently, less than 50% of occupiers in India meet their energy needs with renewable sources, but an impressive six out of ten aim to increase that to 90% by 2030. Collaboration between landlords and occupiers will play a pivotal role in meeting the growing demand for sustainable buildings.

Also Read: Offices in Mumbai can save ₹175 cr power bills annually by switching to greener air conditioning: JLL

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– Bengaluru & Mumbai record highest net absorption of 3.6 and 2.5 MSF respectively 

– Gross leasing volume crosses 20 MSF, registering a 33% increase y-o-y

– Bengaluru and Mumbai together hold 57% of share in total leasing volumes

The Indian office market continues its positive trajectory, registering a net absorption of 11.5 MillionSquare Feet (MSF) across top 8 cities in Q1-24, according to Cushman & Wakefield’s Q1 office data. This is the third-highest level recorded in the last five years, demonstrating a robust appetite for office space among businesses. Net absorption is a barometer of real demand or expansion of occupied space in the market. 

While this quarter’s net absorption was 38% lower than the exceptional Q4-2023, it was a 44% increase over Q1 2023, indicating continued space occupation by businesses. Bengaluru and Mumbai emerged as the leading markets, absorbing 3.6 MSF and 2.5 MSF of space, respectively. They were followed by Hyderabad at 1.6 MSF, Delhi-NCR at 1.5 MSF and Pune at 1.3 MSF, Ahmedabad and Kolkata at 1 MSF, and Chennai at .8 MSF.

According to the report, the Gross Leasing Volume (GLV) also remained robust at over 20 MSF, a 20% decrease q-o-q but a steep rise of 33% on y-o-y basis. Gross leasing volume, which factors in all leasing activity in the market, including renewal of contracted term by corporates, is an indication of overall market activity. This quarter’s figures signify a resilient market with sustained interest in office space. 

Nearly a third of the entire India GLV was recorded in just one city, Bengaluru (6.7 MSF), followed by Mumbai (4.8 MSF) with a share of one-quarter. The two cities combined had a share of over 57% in total leasing volumes for the first quarter. A significant contribution to Bengaluru’s healthy leasing volume was 4.8 MSF of fresh leasing activity, and the city accounted for 33% of total fresh space leasing across the top-8 markets. The city also received close to 2.0 MSF of pre-commitments during Q1-24, thereby making it the largest contributor amongst all.

In line with the trend seen in recent past, fresh leasing continues to dominate GLV with 72% share, with pre-commitments and term renewals taking-up the balance 28% in GLV. 

Among the sectors, IT-BPM and Engineering & Manufacturing sectors emerged as the major drivers of demand, contributing over 45% to the GLV. The BFSI and Flex Space leasing followed with ~17% and ~11% shares, respectively. 

Global Capability Centers (GCCs) took-up close to 4.5 MSF (~22% share in GLV) of office space in Q1, further consolidating the belief that this sector is having a positive influence on office market of India. 

The first quarter also witnessed close to 13 MSF of new supply, continuing the momentum of healthy supply from previous quarters. The cities that saw the biggest supply additions were Hyderabad (2.9 MSF), Bengaluru (2.9 MSF) and Delhi-NCR (2.8 MSF). These three, together accountedfor over 67% of total supply in top-8 cities. The new supply, coupled with strong absorption, led to a slight decline in the national vacancy rate to 18.1%. Notably, Mumbai’s supply-constrained market witnessed the sharpest vacancy rate drop by 1.22% points to ~17%. 

Rents across most cities exhibited a slight upward trend, reflecting the positive market sentiment and rising demand.

Commenting on the Q1 numbers, Anshul Jain, Chief Executive, India & Southeast Asia and Head of Asia Pacific Tenant Representation said, “The Indian office market is experiencing a robust momentum. We haven’t witnessed 20 MSF of leasing being recorded for two consecutive quarters in recent history. This strong performance may signal a shift and has the potential to become the new standard for the Indian market. The strong leasing, coupled with net absorption of 11.5 MSF– the third highest in the past five years (the previous being in Q4 2023 and Q2 2019) – signifies a surge in tenant interest for office space. As witnessed in the previous quarters, the impressive surge in office demand is primarily driven by fresh leasing. We are confident that a balanced supply pipeline and continued tenant demand will propel further growth in the Indian office market.”

Adding on to this, Veera Babu, Managing Director, Tenant Representation, India said, ” The tightness in vacancy rates, particularly in key markets lik​e Bengaluru, Pune, and Mumbai, is noteworthy. This trend persists despite new supply additions in most cities, indicating a strong and growing demand for office space. This could push occupiers to act proactively by pre-committing in the upcoming quarters, ensuring they secure the right space for their needs. Overall, the outlook for the office sector remains positive for the year ahead.”

Also Read: Office leasing surges by 35%

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JLL India states that the net absorption in India’s top seven office markets breached the 40 mn sq ft mark and stood at 41.97 mn sq ft in 2023. This not only marks a new post-COVID milestone but also positions it as the second highest annual absorption, trailing only the levels recorded in 2019.

The year has set the platform for India’s office market to enter a phase of ‘accelerated growth’. While net absorption in the first half of the year was subdued, the pace of expansion from corporates quickened in the latter half of the year, reaching unprecedented heights in the final quarter. As a result, office net absorption during the year exceeded even the best scenario estimates of 39.0 mn sq ft as per JLL’s 2023: Year in Review report. This growth was fueled by India’s talent and cost arbitrage, along with its growing reputation as an innovation and R&D hub. The capacity addition in terms of both office space and headcount further validates the confidence in India’s business environment.

Source: Real Estate Intelligence Service (REIS), JLL Research

“The current year is set to be entrenched as a pivotal chapter in the growth story of India’s office market. Gross leasing in India’s top seven markets exceeded the 60 mn sq ft milestone for the very first time, reaching an impressive 62.98 mn sq ft, a significant 26.4% y-o-y increase. Notably, Q4 2023 proved to be the busiest quarter ever, with gross leasing reaching 20.94 mn sq ft.. Additionally, the growth-oriented ecosystem in India continues to be a lucrative magnet for both domestic and foreign occupiers. Global corporations are channelling substantial investments into their India operations, while domestic occupiers are pursuing expansion strategies in response to this trend. In a year marked by global headwinds, these achievements are a testament to the market’s strong underlying fundamentals and growth prospects. They also solidify India’s position and firmly establish its credentials as the ‘office to the world’’, said Rahul Arora, Sr. MD – Karnataka and Kerala; Head – Office Leasing Advisory and Retail Services, India

Bengaluru and Delhi NCR lead the way, unprecedented market activity in Chennai

Bengaluru and Delhi NCR emerged as clear frontrunners in the market, accounting for 24.6% and 22.1% of the overall gross leasing in 2023, respectively. Chennai, the surprise package, followed with a significant share of 15.1%. Notably, it achieved a historic high of 9.50 mn sq ft in gross leasing during the year.  Hyderabad followed closely with 9.26 mn sq ft. Mumbai and Pune followed in that order. Kolkata witnessed a resurgence in market activity with gross leasing recorded at a historic high of 1.90 mn sq ft.

In Q4 2023, Bengaluru maintained its leadership position with leasing activity amounting to 5.56 mn sq ft, followed by Delhi NCR at 3.80 mn sq ft. Chennai exhibited remarkable growth with quarterly leasing recorded at 3.41 mn sq ft. Hyderabad and Mumbai also demonstrated strong activity, with 2.74 mn sq ft and 2.70 mn sq ft, respectively.

GCCs and flex occupiers remain key drivers of leasing activity

India’s growth-oriented ecosystem continues to attract both domestic as well as foreign occupiers, as global corporations make significant investments into their India operations and domestic occupiers follow expansion strategies.

However, there has been a shift in demand composition, with the tech sector’s share decreasing to 20.9% in 2023, its lowest in over a decade. This decline can be attributed to the sluggish space take-up by third-party outsourcing firms, given global headwinds and slower revenue growth.

In contrast, there has been increased traction from the manufacturing/industrial and BFSI sectors, particularly through the establishment of GCCs. Both segments set new records in leasing volume, with each leasing ~11.3 mn sq ft of office spaces during the year. Flex space providers also enjoyed greater occupier acceptance, leasing a historic high of ~10.3 mn sq ft. The consulting segment demonstrated robust demand as well, leasing ~6.1 mn sq ft, indicating sustained and secular demand across all major occupier categories.

In Q4, the tech sector saw a resurgence in space take-up, capturing a 23.2% share, followed by significant activity from the BFSI and the manufacturing/industrial segments. Flex space take-up was slightly slower in Q4, accounting for a share of 13.6%. Nonetheless, the segment continues to witness strong momentum, driven by managed space operators and high demand from occupiers across various industries.

Grade A office stock crosses the remarkable milestone of 800 mn sq ft

Grade A office stock in the top seven cities achieved a significant milestone, surpassing 800 mn sq ft, further solidifying India’s position as a prime destination for office spaces. In the fourth quarter of 2023, new completions kept pace with leasing activity, reaching 18.75 mn sq ft. New completions during the quarter were headlined by Hyderabad which accounted for a 33.4% share, followed by Mumbai with an 17.8% share. Bengaluru and Chennai followed with 14.3% and 13.5% shares, respectively.

For the entire year of 2023, new completions stood at 53.64 mn sq ft, a marginal decrease of 7.9% y-o-y. Hyderabad and Bengaluru combined to contribute 56.9% of the annual supply, with other significant contributors being Chennai and Delhi NCR.

Vacancy decreases by 10 bps

Vacancy on a pan-India basis stands at 16.7%, a modest 10 bps decrease q-o-q. Core markets and superior quality institutional assets continue to find favour from occupiers resulting in significantly lower vacancy rates, usually in the single digits. It reflects occupiers’ clear preference for such premium assets that possess sustainability certifications and aligns with their organizational objectives of enhancing employee satisfaction, maintaining high health and safety standards, promoting efficiency, and implementing corporate net-zero strategies.

Outlook: Net absorption to align more closely with 2019 levels

“India’s office market has demonstrated unmatched resilience and continues to defy global sluggishness, with strong underlying fundamentals supporting sustained growth in demand. Over the next 3-4 years, we anticipate that the market activity witnessed in 2019 will become the new norm. Net absorption levels in India’s office market will align more closely with 2019 levels, hovering in the 45 – 48 mn sq ft range. The market activity is expected to be primarily driven by the entry of new GCCs into the country, along with existing GCCs expanding their operations. Additionally, India’s manufacturing policies are likely to attract high-end R&D work. Flex space providers are also expected to continue their momentum as they become an integral part of occupiers’ portfolio strategies”, said Dr. Samantak Das, Chief Economist and Head of Research and REIS, India, JLL

Also Read: Office sector sees robust demand with projected net absorption of 37-39 mn sq ft in 2023

The post India’s office market defies global headwinds to scale new heights in Q4 2023, net absorption soars to an unprecedented 16.01 mn sq ft appeared first on Square Feat India.

Although, the start of the year was cautious, 2023 is on course to become one of the best-performing years in real estate sector across asset classes. Indian real estate market displayed exceptional resilience as optimism prevailed in domestic markets, despite volatility across the developed markets. Demand for commercial real estate is expected to match or even surpass the leasing records set in 2022. Domestic occupiers across diverse sectors such as technology, financial services, engineering & manufacturing, FMCG, and healthcare have ensured that the India office market remains active and grows from strength to strength. With continued adoption of “office dominant-hybrid work” and “hub & spoke” models, flex spaces particularly have been in high demand. Residential segment meanwhile performed significantly better than market expectations, drawing comfort from largely stable interest rates. Industrial & warehousing sector too is expected to put a commendable performance in 2023 led by strong growth in manufacturing output & expansion of logistics services. Institutional investments in Indian real estate remained buoyant throughout 2023 led by investors’ unabated appetite for growth opportunities.  

2024 is likely to be a year of redemption where real estate will reshape, restructure, and realign on a stronger domestic footing. Although office assets will continue to constitute the bulk of investment inflows in 2024, alternate asset classes like data centres, life sciences and shared spaces will witness increased traction. Additionally, all throughout 2024 and beyond, sustainable elements and digital touchpoints will percolate across all real estate verticals.

Office

2023 round-up: Office demand continues to remain buoyant

2023, largely anticipated to be a year of cautious optimism for commercial real estate in India, has eventually emerged stronger than market expectations. Even in the face of global geopolitical tensions and elevated inflation levels, the first three quarters of 2023 witnessed healthy leasing activity across the 6 major office markets of the country. Gross absorption touched 38 mn sq ft, equivalent to the corresponding period in 2022. Although share of Technology sector in overall office leasing saw a decline from 35% in 2022 to 25% in 2023, domestic companies across flex spaces, Engineering & Manufacturing, and BFSI stepped up the ante in taking incremental space. This diversification underscores India office market’s adeptness in countering external challenges. 2023 is expected to close on a stronger note; the momentum is likely to continue, and gross absorption is anticipated to be around 50 mn sq ft, at par or better than the historic performance of 2022. Flex spaces will further solidify their presence in occupiers’ portfolio, contributing almost one-fifth of the office space demand in the country.

2024 outlook: A year of dynamism and innovation

If 2023 has been a year of successfully overcoming the initial jitters, 2024 is expected to be the year of consolidation upon strong foundations, reflecting stability in India’s office market. Occupier needs will continue to evolve and market offerings will continuously realign themselves. Strong growth prospects in Indian economy and healthy domestic outlook will keep occupier as well as developer confidence intact. Demand- supply equilibrium will keep vacancy levels rangebound lending room for rental upside.

·       Portfolio diversification – “Core + Flex” strategy – Considering flexibility & scalability benefits offered by shared workspaces, the “Core + Flex” model will continue to be preferred by occupiers. Moreover, a steady adoption of intra and intercity “Hub and Spoke” models, will accentuate the trend of occupiers incorporating flex spaces in their real estate portfolio. Developers and operators too will increase their flex offerings, increasing the flex penetration in Grade A office stock closer to 10%, up from less than 5% before the pandemic.

·       Secondary, peripheral and tier II/III markets to witness heightened activity – With greater adoption of ‘Hub and spoke’ models and rental arbitrage coming into play, secondary and peripheral business districts are likely to remain office market hotspots across major cities. Occupiers will push for establishing their core offices in CBDs and at the same time seek satellite offices across secondary and peripheral markets. Improving connectivity, enhanced social & physical infrastructure and proximity to residential catchment areas will make peripheral micro markets particularly favourable for both conventional and shared workspaces. Simultaneously, select Tier II cities are primed for heightened office activity fuelled by talent availability, rise of hybrid work culture, infrastructure enhancements, and improving Grade A office supply.

·       Technology and GCC demand to bounce back – With expectations of receding impact of global economic headwinds, GCCs will resume real estate decisions in India. Owing to its talent pool, relatively lower office rentals and supportive legal framework, India will continue to remain a preferred destination for global players looking to setup their capability centers. Leading international tech companies will also expedite incremental space take-up in major office markets of the country. Meanwhile, domestic occupiers from sectors such as Engineering & Manufacturing, BFSI, Consulting, Healthcare, Edutech & E-commerce etc will continue to diversify the leasing landscape.

·       SEZs to see increased occupier activity- Recent amendments in SEZ regulations allowing floor-wise denotification is expected to boost leasing across SEZs, further improving occupancy levels. The amendment will not only facilitate the expansion of companies’ office spaces, but also extend the benefits of SEZ areas to Non-SEZ entities. The new regulations will diversify the SEZ tenant base by allowing occupiers from both export and domestic businesses. Overall SEZ vacancy level thus is likely to get reduced from current 20% levels to 10-15% in the next few years.

·       Focus on sustainable elements– Sustainability will increasingly take centre stage in Indian commercial real estate. A sizeable portion of upcoming supply will be green certified right from Day-1 of operation – in a way reflecting increasing occupier preference of sustainable elements including green-leases. Developers too are likely to benefit from upside in occupancy levels and rentals of green certified developments. Retrofitting of older assets and E-upgrade of existing developments will pick up pace, reducing the carbon footprint and improving the energy efficacy of India office ecosystem. Interestingly, ESG due diligence and assessments will increasingly be the norm in office market.

Residential

2023 round-up: Consecutive year of record high activity

Residential real estate activity in India is all set to outperform 2022, which witnessed decadal high sales across the major cities of the country. Both sales and launches in 2023, until the third quarter, have come close to 2022 levels. Considering the festive boost in Q4, 2023 is likely to witness 20-30% higher sales as compared to 2022. Given heightened demand across housing categories, average prices in 2023 have increased by up to 20% on an annual basis. Despite the rise, affordability of buying houses remains intact in India. With the repo rate remaining unchanged since February, financial obligations for the consumer have largely been stable. Higher growth in disposable income compared to the increase in housing prices have led to a strong housing demand throughout 2023 – be it for buying or renting out purposes.

2024 outlook: Growing tech savviness amidst moderation in activity

Although the momentum in residential real estate is likely to continue into 2024, we might witness the base effect coming into play and thus growth in sales, launches and prices will remain moderate. With adequate inventory and uptick in ready to occupy property supply, the residential market is likely to be evenly balanced between homebuyers and developers. Developers with a track record of timely execution of projects will continue to see good traction in the market.

·       Leveraging technology to the fullest- Home buying experience will increasingly involve seamless integration of artificial intelligence, machine learning and cloud computing. Homebuyers across age-groups will increasingly prefer smart homes, virtual tours, and digital transactions. Evolving construction technologies and environment-friendly practices are anticipated to provide further credibility to sustainable housing soon. Premium developments of reputed developers are likely to see technology playing a key role in delivering personalised services that improve comfort. Advanced technologies like AI and chatbots will be used for services like virtual concierge services, biometric authentication, higher security and thus provide an upscale living experience.

·       Surge in premium segment activity – Demand for second homes, vacation homes and plotted developments is likely to remain unabated in 2024. Given the envisaged momentum in high-end segment, companies with related expertise in hotels and luxury segment are expected to increasingly foray into the premium residential market of Tier I cities. Nevertheless, affordable, and mid-segment housing will continue to drive volumes. However, a perceptible increase in share of luxury housing in overall residential market sales is on cards for 2024.

·       Infrastructure projects to shape homebuying behaviour- With new airports, metro routes and arterial roads, most major Indian cities are undergoing a massive infrastructure upgrade. The upcoming infrastructure facelift will act as a catalyst for residential activity in the influence zones. Catchment areas along project corridors will witness significant capital value appreciation, attracting investors and end-users alike. As infrastructure projects get completed throughout 2024, peripheral areas will become integrated with central and suburban areas, resulting in homogenisation of activity across key residential pockets of respective cities.

·       Developers likely to expand into newer geographies- Owing to untapped potential and increased preference for comprehensive offerings in gated communities of tier II and III markets, organised residential real estate is well poised to embark on the next growth phase in markets like Vadodara, Nashik, Lucknow, Jaipur, Chandigarh, Coimbatore, Mysore, Kochi, Indore, Bhubaneshwar, Guwahati etc. Investors will increasingly look for residential investments in these cities which have a higher upside potential compared to Tier I cities. Developers are likely to infuse quality supply in such emerging markets and peripheral locations of metro cities as well.

·       Co-living and housing rentals to stabilize- The pandemic ushered in an era of remote-work & study and thus a reverse migration from bigger to smaller cities. However, by 2023, normalcy with respect to having a physical presence has been almost completely achieved. Most organisations have mandated at least a 2-3 day/week physical presence in offices. With the migration back to bigger cities effectively being completed, 2024 is likely to see rationalisation in terms of rental values increase. 2022 and 2023 witnessed rental values in certain micro markets go up by 30-40% YoY. Such steep increase in housing rentals including monthly charges in co-living properties is expected to rationalise in 2024. The moderation will be more prominent in tech hubs like Bengaluru, Hyderabad and Pune.

Industrial & warehousing

2023 round-up: Powering ahead with robust demand

Driven by government initiatives, increased institutionalization, persistent investor interest and an upswing in demand from 3PL and E-commerce players, the past few years can be envisaged as an accelerated growth phase for the industrial & warehousing sector of the country. During the first three quarters of 2023, the industrial & warehousing market witnessed 17 mn sq ft of gross leasing, almost comparable to the corresponding period of 2022. Although Delhi NCR continued to remain the frontrunner, demand emancipating from Pune and Mumbai remained upbeat during the nine-month period in 2023. The micro markets of Bhiwandi in Mumbai and Chakan-Talegaon in Pune witnessed maximum leasing activity at an India level. Third-party logistics players (3PLs) continued to be the top occupiers of warehousing space, contributing to about 40% share in total industrial & warehousing demand of India. Leasing momentum is expected to continue in the final quarter of 2023 led by 3PL, engineering and FMCG players and is likely to close in the range of 22-25 mn sq ft.

2024 outlook: Heightened interplay of sustainability and technological advancements

2024 is likely to be a continuation of bright prospects which will act as accelerated growth catalysts for the industrial & warehousing sector. India remains the fastest-growing major economy, harboring immense potential for real estate demand in the sector. Backed by rising capital investments, manufacturing output and supportive government policies, the industrial & warehousing sector is expected to grow from strength to strength in India. Furthermore, technology related aspects are going to be more pervasive throughout. Going forward, AI and IoT enabled monitoring and proliferation of smart & automated warehouses will redefine the industrial & warehousing sector.

·       Government policy thrust to materialize into demand uptick– Steadfast implementation of existing government programmes and projects such as Make in India, Gati Shakti, Multi-Modal Logistics Parks (MMLP), Performance Linked Incentives (PLI) scheme etc. will continue to provide a fillip to the industrial & warehousing ecosystem in the country. Key projects including SagarMala project and industrial corridors will prove to be major enabling factors in the growth story of industrial sector and translate into heightened demand for warehousing spaces across tier I and II cities of the country.

·       Q-commerce to fuel demand for micro-warehouses- With increasing demand for quick deliveries Q-commerce will further pick up pace, leading to heightened demand for micro-warehouses and in-city warehousing. Rise in number of micro-warehouses will lead to higher scale of operations, which in turn would lead to higher demand for hub warehouses.

·       EVs likely to propel new demand- Rapid growth in EVs and in turn battery manufacturing, is likely to create significant demand for land for setting up giga factories. EV related tax incentives and various incentives provided for battery manufacturing would boost production as well as real estate demand in the segment.

·       Consolidation on the cards– With prominent domestic real estate players and global investors looking for significant expansion in the industrial & warehousing space, the sector is likely to witness increased consolidation. This is likely to lead to increased institutionalization in the sector and bring in a combination of global and local expertise with respect to advanced technologies and operational efficiencies. Institutionalization of the sector is bound to pave way for potential warehousing REITs in the future.

·       Increased demand for green warehouses– In the next few years, there will be increased preference for sustainable and green certified warehousing spaces, and logistic parks with energy efficient systems, adaptive climate control solutions and efficient layouts. Moreover, investment considerations are also likely to factor adoption of sustainable elements more stringently.

Investments

2023 round-up: Institutional investments in Indian real estate remain firm

Institutional investments in India continued to remain resilient and attractive during January-September 2023. At USD 4.6 bn, the first three quarters  witnessed a 27% YoY increase in fund inflow, despite challenging business environment during the year. At 63% ,  office sector drove overall investment inflows during the period; the sector also witnessed some notable large deals. Industrial & logistics sector also witnessed a 3.5X surge in investment inflows; this can be attributed to sustained growth in manufacturing sector, which strongly corelates with consumption levels. While global investors continued to dominate funding activities with higher participation in entity-led deals, the annual growth in domestic investments was particularly remarkable at 70%. About half of the total investments by domestic investors was directed towards residential assets during the period. Institutional investment inflows for the full year is set to comfortably surpass 2022 levels of USD 4.9 Bn; it has already reached 93% of the last year’s volume in the first three quarters of 2023.

2024 outlook: Stable market conditions to create opportunity galore for investors

2024 definitely looks more positive and might see increased investor activity amidst a robust economic environment and positive play of market indicators. With global investors partnering with local developers, there is ample dry powder to be invested in the Indian real estate market, especially in office and industrial sectors which is likely to be deployed in a phased manner in the short term. Within APAC, India is expected to remain the most preferred emerging region owing to its fast-paced growth trajectory, attractive pricing, better valuations, and higher yields. Global as well as domestic investors will continue to allocate funds in various markets and asset classes while keeping their core focus towards office assets.

·       Alternative investments to rise – During 2024, most investors are likely to expand their portfolios beyond core office assets, exploring alternate asset classes such as data centers, life sciences, holiday homes, co-living, etc.

·       Industrial & warehousing sector to see uptick in investments – India’s manufacturing sector is growing at an impressive pace owing to robust demand and increased industrial output. Manufacturing, industrial & warehousing sectors are pivotal components in India’s journey towards a USD 5 trillion economy. Demography driven consumption pattern and rising warehousing demand from 3PL & E-commerce will result in attractive investment scenario for the industrial & warehousing sector in the short to mid-term.

·       Creation of more platforms and joint ventures – Amidst limited availability of ready office assets, investors will continue to create platforms and JVs with developers for developing high quality Grade A office assets across multiple locations. A robust Grade A under construction supply pipeline of over 150 mn sq ft in the next 3 years will provide multiple opportunities for investment in greenfield assets.

·       Different deal structures to co-exist – Performance credit, special situations, portfolio acquisitions, asset reconstruction and other innovative structures have been growing and are likely to attract more investments. Moreover, amendments in alternate investment funds (AIFs), green financing, and REITs are likely to futrther simplify investments from foreign as well domestic investors.

·       Green financing and sustainability reporting to gain increasing prominence– As sustainability increasingly becomes a key driver in investment decisions, green-financing is likely to gain prominence in India, provided there is a concerted effort by all stakeholders. With ESG reporting becoming gradually mandatory in India, investors will remain in constant pursuit for portfolios with well-defined sustainability goals and net-zero targets.

Also Read: Office Rental Values Rise 7% Y-o-Y in Top 7 Cities

The post Indian Real Estate: Altered courses and emerging stronger in 2024 appeared first on Square Feat India.

The global real estate services company [NYSE: CWK] said in its 2024 Asia Pacific Office Outlook that the top eight Indian real estate cities were expected to cumulatively account for just over half of the region’s total demand. The combined demand forecast for Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune is around 40 million square feet (msf), which is equivalent to around 52 percent of regional demand.

Mainland China’s four key office cities—Beijing, Shanghai, Guangzhou and Shenzhen—were also expected to continue a gentle recovery, with demand of 18 msf forecast for 2024, up from the 13 msf expected by this year-end.

Southeast Asia markets would also contribute to regional topline demand, with Kuala Lumpur and Manila office markets in particular likely to benefit from their countries’ expansive economic growth outlooks, and Singapore likely to remain a steady performer.

Figure 1: Regional annual grade A office net absorption (msf) and vacancy rate by broad geography**Tier 1 mainland China: Beijing, Guangzhou, Shanghai, Shenzhen; India: Ahmedabad, Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai, Pune; Rest of APAC: Bangkok, Brisbane, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Seoul, Singapore, Sydney, Tokyo.

Despite improvements in demand, approximately half of the 25 markets forecast will see vacancy rates increase between 2023 and 2027. The largest vacancy rate increases are forecast for Guangzhou (to almost 30% by 2027 from 20% in 2023) and Shenzhen (to almost 35% by 2027 from 27% in 2023). Hyderabad, Kuala Lumpur and Bangkok are also forecast to exceed vacancy rates of 25% by 2027. Singapore and Seoul are both expected to retain vacancy rates below 5% while Tokyo and Manila are forecast below 7% through 2027. Key Australian markets are likely to remain stable at around 10%.

Anshul Jain, Managing Director, India & Southeast Asia and Head of APAC Tenant Representation, said, “It is fascinating to see India coming of-age and anchoring commercial real estate demand for the Asia-Pacific region. It is unsurprising though, given the faster-than-expected rise in GDP growth, controlled inflation, vast tech talent pool, and the recent trends of global corporations entering India. Elsewhere in Asia, demand in main cities in China improved YoY, while markets like Sydney, Melbourne, Tokyo fared positively as well. Singapore showed resilience in demand despite a tough economic environment.”

He went on to add, “Large-sized deals, which were on hold in the last few quarters due to macroeconomic uncertainty are likely to make a come-back in 2024. With an increase in hiring and a higher return-to-office, overall office absorption is set to change. A healthy supply pipeline, meanwhile, will help occupiers maintain some rental stability.”

Figure 2: New supply in 2023-27* (msf) and as a percentage of existing stock in 2023

Forecast author and Head of International Research for Asia Pacific Dr. Dominic Brown said it was unsurprising that the region’s largest office markets would continue to drive both demand and supply in 2024.

“Asia Pacific has entered into a period of above average new supply, which is expected to continue through to 2025 before starting to ease. Sixteen of the 25 markets forecast will see more supply in the 2023–25 period than in 2017–19 as pandemic-delayed construction projects continue to enter the market.”

Figure 3: Forecast indicators for key Asia Pacific office cities

Hyderabad and Bengaluru in India, and Shanghai and Shenzhen in China are all expecting more than 55 msf of new supply by 2027 – additions of between 32% and 66% of their existing stock, with Hyderabad expecting a record 15.6 million square feet (msf) in 2024. Shenzhen, Hyderabad and Ho Chi Minh City in Vietnam each expect to welcome more than fifty percent of their existing office stock in 2024.

In contrast, supply pipelines through to 2027 in each of Brisbane, Jakarta, Seoul and Singapore total less than 10% of their existing stock.

Dr. Brown said there was reason for ‘cautious optimism’ in the office market despite the global economic uncertainty that was likely to continue into 2024.

“There remain opportunities for both occupiers and investors who understand the nuances of local sub-markets. The ongoing flight to quality by tenants looking to improve their ESG and wellness offerings to employees will continue to encourage supply-led demand across the region while investors who understand true, rather than headline vacancy rates, and who seek out either high-quality assets, or assets with repositioning potential in good areas, will reap the benefits.”

Economic context

Dr Brown added: “Inflation, while improved, remains elevated in most economies across Asia Pacific. Trade has slowed as businesses and households alike have reined in expenditure in response to interest rate increases.

“On the positive side, growth of between 3.5 and 4.0 percent is forecast for Asia Pacific in 2024, which, while slower than the 4.5 percent forecast for this year, is stronger than both the eurozone, where growth of 0.9 percent is forecast next year, and the US, which is expecting -0.3 percent.”

Within Asia Pacific, growth forecasts are varied. Emerging markets Vietnam, the Philippines, India and Malaysia are likely to benefit from strong domestic consumption and increasing foreign direct investment, while a potential rebound in tourism, which remains 25 percent below pre-pandemic levels in Asia Pacific, could support growth in Thailand in 2024.

Among the more mature economies, Singapore and South Korea are expected to see the beginning of a rebound as trade starts to recover; Australia and Japan are likely to trail the region’s growth expectations. China’s outlook, impacted by weaker export demand and soft domestic consumption, remains mixed.

Also Read: India emerges as one of the top growth markets in the APAC region

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·       2024 office net absorption to increase by 20-22% year-on-year, reaching 45-47 mn sq ft

·       2023 office supply expected at 47-49 mn sq ft

·       2024 supply projected to rise by 22-23% year-on-year, reaching 58-60 mn sq ft

The office sector has seen sustained growth in demand in 2023 despite the global sluggishness and is poised to achieve next level of growth in 2024 according to JLL recent report titled ‘2023: A Year in Review’.

Net absorption from Jan-Sep 2023 was at 26 mn sq ft which is 68% of 2022 full year number. In 2023, net absorption in office market is expected to be at par with 2022 to close at 37-39 mn sq ft. With leasing activity expected to further pick up pace in the last quarter of 2023, the year is expected to surpass the 2017-2019 average. The office markets’ performance is a testament to the strong fundamentals of demand and the absence of any lasting effects of the global headwinds.  In 2024, Net absorption is further expected to increase by 20-22% to touch 45-47 mn sq ft.

Despite a 23.9% year-on-year decrease in supply during the first nine months of 2023, it is anticipated to strengthen and reach approximately 47-49 mn sq ft by the end of the year. In line with the net absorption, the supply in 2023 will be higher than the 2017-2019 pre-pandemic average. In 2024, it is expected to increase by 22-23% y-o-y to reach 58-60 mn sq ft. It is seen that there is a trend of flight to quality creating demand polarization towards buildings owned by institutional owners and established developers.

“The office space in India’s top seven markets is expected to increase to over 800 mn sq ft by the fourth quarter of 2023, up from the current 792.8 mn sq ft as of September 2023. ESG continued to remain a decisive action point for all stakeholders in 2023 as energy consumption, green and net zero commitments are driving corporate action. The increasing importance of sustainability is reflected in increase in green certified buildings in last few years. Green certified buildings share in Grade A office stock went up from 39% in 2020 to 53% in 2023 (as of September 2023),” said Rahul Arora, Head – Office Leasing Advisory and Retail Services, India, JLL.

India’s office market: performance-based resilience

Source: Real Estate Intelligence Service (REIS), JLL Research

Headline vacancy is expected to remain within 16-17% range by end of the year. With a strong supply pipeline of 55-60 mn sq ft lined up in 2024, vacancy is likely to remain sticky at 16-17% on the back of strong demand. Core markets, however, will continue to see single digit vacancy levels.

In 9M 2023, there is a slight decline in space take-up by tech firms but is still likely to account for the biggest share in gross leasing by the end of the year. Other segments such as manufacturing / industrial, BFSI and Consulting through setting up of Global Capability Centres (GCCs) strengthened their participation in leasing activity. Interestingly, GCCs have a 54% share in active office space requirements in top seven cities of India.

“In the year 2023, so far, India’s office market has stayed truly on course to see remarkable performance as net absorption is expected to exceed the three-year pre-pandemic average. We are likely to see net absorption of around 37-39 mn sq ft which is further expected to go up by 20-22% y-o-y to reach 45-47 mn sq ft in 2024. India’s innovation-led ecosystem, large talent pool and favorable policy initiatives will create a perfect growth tide for the office sector to flourish further in 2024. It is expected that more R&D Centres of Excellence will be set up in India at an accelerated pace. Therefore, GCCs will continue to be major drivers for increasing occupier demand in the future.” said, Dr Samantak Das, Chief Economist and Head of Research and REIS, India, JLL. 

Flex continues to drive market activity.

With sustained demand for flexible and managed enterprise services, flex leasing in 2023 is expected to surpass the previous peak achieved in 2022 to close at ~145,000 seats. 9M 2023 is already ~80% of the total seats leased in the full year 2022. In 2024, around 150,000+ seats are expected to be leased by flex segment. There is sustained demand for flex as an essential element of occupier strategies which now assimilate both conventional and on-demand flex spaces for portfolio optimization and better employee experience.

Trends look forward to in 2024:

·       GCCs key to increasing occupier demand; to help push absorption near previous peak levels. Segments like manufacturing, engineering R&D with Tech & BFSI are key drivers in this segment. 

·       With a strong supply pipeline of 58-60 mn sq ft lined up in 2024, headline vacancy is likely to remain sticky at 16-17%. Core markets, however, will continue to see single digit vacancy levels.

·       Institutional, quality assets will remain first choice of occupiers with ‘flight to quality’ a running thread in space requirements.

·       Sustainability will be key to real estate planning and portfolio strategy with occupiers demanding responsible real estate as part of their net zero targets.

·       Office portfolios are likely to expand further as hybrid working evolves with a strong ‘office-first’ approach.

·       Flex segment and dispersed Tier 1/Tier 2 strategy to drive space needs in 2024.

Also Read: How Infrastructure Projects are Creating New Real Estate Opportunities

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India’s most prominent office market Bengaluru remained slow during the July-September period as office space gross leasing fell by 28 per cent year-on-year while new supply declined 25 per cent, according to Vestian.

Real estate consultant Vestian expects office demand in Bengaluru to rise with large IT companies calling their staff back to office.

Vestian has released its office market report for the third quarter of this calendar year, showing 21 per cent growth in office leasing and 26 per cent increase in new supply across top seven cities.

As per the data, the absorption of office space in the July-September period rose 21 per cent year-on-year to 15.9 million square feet across seven major cities — Bengaluru, Hyderabad, Chennai, Mumbai, Pune, Delhi-NCR and Kolkata.

Across these seven cities, the new office space supply increased 26 per cent annually to 13.4 million square feet during the third quarter of this calendar year.

Shrinivas Rao, CEO, Vestian, said, “In Q3 2023, the Indian office sector witnessed heightened real estate activities as absorption reached the highest level since pandemic and new completions increased to a five-quarter high.”

The sector also reported healthy vacancy levels with an appreciation in average rentals, Rao said. “This showcases the robust fundamentals of the sector and a healthy demand for quality office spaces in India,” Rao noted.

City-Wise Trend of gross leasing and new supply during July-September:

Interestingly, Bengaluru — the largest office market with a huge presence of IT companies — witnessed a significant decline in leasing transactions and the new supply. In Bengaluru, the absorption of office space fell 28 per cent year-on-year to 3.6 million square feet during the July-September quarter. The new supply also declined 25 per cent year-on-year to 2.7 million square feet.

Leasing of office space in Delhi-NCR also fell 14 per cent year-on-year to 3 million square feet during July-September. New office space supply plunged 82 per cent to 0.5 million square feet.

During the July-September quarter, the leasing transactions of office space in Chennai rose 82 per cent to 2 million square feet. The new supply was up 71 per cent to 1.2 million square feet.

In Hyderabad, the leasing of office space jumped 270 per cent to 3.7 million square feet. New supply soared 175 per cent to 5.5 million square feet.

Leasing of office space in Mumbai rose 21 per cent to 2.3 million square feet. New supply jumped 125 per cent to 0.9 million square feet.

Pune witnessed 83 per cent increase in office leasing to 1.1 million square feet. New supply rose 73 per cent to 1.9 million square feet.

Kolkata office market saw 0.2 million square feet of leasing transactions and 0.7 million square feet of new supply.

On the demand-supply trend, Rao said, “The key office markets in Southern cities evolved and commanded the highest share of the pan-India absorption and new completions.”

“Rentals are expected to rise in these cities on the back of renewed demand as many large conglomerates are calling their employees back to the office,” he observed.

Office space occupiers’ profile:

IT-ITeS sector dominated leasing during the July-September period with 25 per cent share. The BFSI sector accounted for 20 per cent of the total absorption in the third quarter of 2023.

Moreover, Manufacturing & Engineering and Flexible Space sectors accounted for 17 per cent and 16 per cent share, respectively, in Q3 2023.

Also Read: Managed Co-Working Player Urban Vault to Add 10,000 Seats in Bengaluru within This Quarter

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